We're doing this wrong: development permits
The current process for managing development permits is inefficient, encourages corruption, and makes it unnecessarily difficult for the city to actually manage the kinds of development that happen. This article seeks to explain the underlying structure of incentives that sustains the status quo and propose an alternative method that addresses these issues. = Why it doesn't work = It's inefficient The current development permitting process, much simplified, goes something like this: a developer buys a piece of land, decides what they want to do with it, applies for the permits they'll need, and then spends the next two or three years haggling with the city over how much of a Community Amenity Contribution they need to make before the city will change the zoning for them. These 'CACs', as they're called, can vary wildly depending on what you're building. Social housing? You're exempt. A 50 storey condo? Very much not exempt. And here's where the negotiations start. You can read the city's policy on CACs for rezoning hereCity of Vancouver Community Amenity Contribution Policy . It's not thrilling, but the key section is the third one on the 'Process for Determining Specific Amenities'. It lists the guidelines for what will qualify as an 'amenity' in the determination of city staff. They are quite vague. Think of the position this puts our planning and development department staff inCity of Vancouver org structure . To do their jobs, i.e. issue permits in a timely manner while ensuring development accounts for the long term needs of the community, they have to sit down and negotiate what are essentially complicated real estate deals. With real estate developers. This is a ludicrous thing to ask of city staff. They're obviously not equipped to succeed at this, and why would they be? They're not real estate developers. They're city planners and building inspectors. They should be planning our city and inspecting buildings, not negotiating real estate deals with real estate developers. In addition, it makes it hard for them to actually manage the long term growth of the city. It's a 'pull' system; it waits for people to apply for permits. And given the current market conditions, that means the city gets to choose from what is basically a bunch of condo projects because it's so hard for anyone to make money building anything else. It encourages corruption This presents us with the second glaring issue: this is a system ripe for corruption and abuse. The developers who get things built are the ones who know the right people; it's basically up to the discretion of city staff, remember? This is not to impugn the people actually doing the work. The problem is with their bosses--the elected ones. We know politicians need money. Here in Vancouver, developers have a lot of it. Given the laxity of our campaign finance laws until recently, it's not hard to foresee the kinds of behaviour this incentivizes. Our permitting process has some of the longest wait times in the country. A couple calls to the right people though, and whoever has that application on their desk gets the orders to move it along. It's wrong, but it's not like anything will change if they speak up, right? So on it goes. This is a large part of why our development market is so uncompetitive. The barriers to entry are daunting--you would have to spend years cultivating relationships to break into the market in a large way, and what big developer is going to bother when they could basically build anywhere else in the world? So projects go to the same group who know how to grease the skids. To be fair, it's hard to blame them. They are what they are; business people responding to the incentives in front of them. If politicians are a good investment (hint: they are), then you're going to get yourself some of those. Think about the potential ROI on a political contribution--you might give a few thousand dollars, but it could turn into millions if it gets you a big project approved. Scatter enough of those around and your odds only get better. As an aside, this might be what bothers me the most: how little our leaders sell us out for. A few grand here and there, all for what is essentially an ego stroking. They get to play politics and be in the spotlight while the people pulling the strings get to run things from the shadows. And the rest of us are, as always, forgotten. = How to fix it = Issue the permits, then auction them This is where we finally get into the actual purpose of this whole process: managing the long term growth of the city in a way that maximizes livability while encouraging a healthy and competitive real estate industry. These two things are not opposed; the venality and ineptitude of our local politicians only makes it seem that way. Here's the situation. Our city government has control over something worth millions of dollars, i.e. redevelopment permits for rezoning. Our city staff know they're worth money, but don't know how much. And why would they? Again, they're not real estate developers. What they do know very well is what we should be building to grow our housing stock sustainably, maintain the character of our city, and ensure everyone that lives here has a roof over their head. This will mean more than just condos: new leafy neighbourhoods full of funky three or four story walk-ups, new streets of tasteful townhomes giving a new generation of families a chance to take root, and a new network of affordable housing units making sure that no one goes without a home. The basic idea is pretty simple: just auction the permits for what you want builtProfessor Tom Davidoff, Business in Vancouver podcast . This isn't even something new for the government; they already do this with things like broadband frequency ranges and stuff they confiscate from criminals. The provincial government literally has an entire department dedicated to auctioning off surplus government assetsBC Auction home page . Here's how it could work for us. Every 6 months, the planning and development departments get together and decide what's going to get issued. They do extensive community engagement work already, and with the ability to influence development before the application process they'll have a much easier time responding to what the community wants. Since they're issuing the permits in advance, we could go so far as to attach designs to them if we wanted. Real estate development is pretty much always going to be profitable here, so whatever it is it'll still get built. Only the price of the permit at auction will be affected. Say there are two condo permits, one with a public library and some low-income units and one that's just market price units. The first one will be less expensive at auction, but that's fine. The developers all make their money, the city gets a fair price for the upzoning, and and we get a public library and some low-income units too. Everyone wins--except for the current crop of developers and local policians. They lose. The permit numbers would be something like x hundred purpose built rentals, y hundred townhomes, etc. They would also lay out where the permits are applicable. When developers buy land, they bid on the permits they want that apply there. Since they're pre-approved for that area, they can start right away once they've won that auction. And since they're competing with each other instead of negotiating with the city they'll actually pay a fair market price for the opportunity to build here--a little more efficient than those CACs. This will also open the door to outside competition: all they need to do is buy some land and a permit. No political contributions required.